6 Benefits of Using a Credit Union (2024)

Most people previously associated banks with trustworthiness, longevity, and stability in the financial world—at least until recently. With the shake-down of the financial markets and the collapse of many financial institutions, many of us question whether banks are the best way to store, transfer and save money.

Key Takeaways

  • Credit unions are community-based banking institutions that are owned, in part, by the union's depositors and customers.
  • While similar to traditional banks in some ways, credit unions come with additional advantages that some may find attractive.
  • A focus on the community, attractive rates, and added perks might lure you away from your bank and to your local credit union.

Credit Union Benefits Overview

Credit unions are free to make decisions to benefit their members rather than seeking to please stockholders, who may have different interests than the members' interests. As a result, credit unions can offer members lower rates on loans, credit cards, and other products, higher savings rates, and lower fees. Members also benefit from insurance on funds up to $250,000, financial education tools, and significant community involvement.

You can only take advantage of a credit union's benefits if you're a credit union member. To become a member, you'll need to join the credit union based on location, occupation, association, or another factor. Not all people are eligible to join all credit unions, but some credit unions offer innovative ways to become a member, such as joining a nonprofit organization for a small fee.

6 Benefits of Using a Credit Union (1)

1. Better Rates on Savings Products

Credit unions strive to offer great rates on member savings accounts and often best bank interest rates where certificates of deposit (CDs) are concerned, in addition to money market accounts. However, you should shop around for the best high-yield savings accounts to compare returns for other products.

2. Lower Rates on Borrowing Products

In general, credit unions charge lower interest rates than banks on a wide variety of products, including:

  • Credit cards
  • Fixed-rate mortgages
  • Adjustable-rate mortgages
  • Used car loans
  • New car loans
  • Home equity loans
  • Personal loans

While you should always shop around and compare rates, starting your loan search at a local credit union may be a real benefit.

3. Lower Fees

Credit unions charge lower fees than other financial institutions, on average. This may include lower or nonexistent fees for account maintenance or fee refunds for everyday banking activities such as ATM withdrawals.

This doesn't mean you won't be charged fees for some services, such as wire transfers or overdrafts. However, fees still tend to be lower at credit unions. Overdraft and nonsufficient fees are 13% to 19% lower at small banks and credit unions than at large banks, according to 2021 research from the Consumer Financial Protection Bureau.

4. Member-Owned Financial Services

Credit unions often consider themselves "financial cooperatives" rather than financial institutions. So perhaps the most outstanding feature of credit unions is that they are member-owned and member-run, with opportunities to vote for a volunteer board of directors elected by members. This board helps run the credit union.

5. Up to $250,000 Insured

Up to $250,000 of your funds in a credit union account is insured by the National Credit Union Share Insurance Fund, as managed by the National Credit Union Administration (NCUA). The $250,000 standard insurance amount is per owner, per insured credit union, for each account ownership category.

6. Perks and Free Education

Some credit unions offer products such as individual health insurance and financial advisory services. Most credit unions focus on community enrichment and financial education, with many offering free classes or other educational services to the community, including debt or budget counseling, in-school credit union branches, and first-time homebuyer programs.

What are the Main Benefits of a Credit Union vs. a Bank?

The main benefits of a credit union vs. a bank are that credit unions tend to offer better rates and customer service, lower fees, and a national network of ATMs. However, a bank may offer more branches and products than a credit union.

What is the Main Disadvantage of a Credit Union?

The main disadvantage of a credit union is not being able to join if you don't qualify for membership. You may also find fewer storefront branches, services, and products available compared to a traditional bank.

Are Credit Unions Safer than Banks During a Recession?

Credit unions may be safer than banks in an economic collapse or recession due to taking fewer large risks regarding consumer and commercial loans and investing. However, a credit union can fail. If a credit union fails, up to $250,000 of your deposited funds are protected by NCUA insurance.

The Bottom Line

If you're frustrated with long lines and unresponsive customer service, a credit union might be the best place to put your money. It's tough to beat a friendly, community-focused financial institution offering lower fees and better interest rates. Compare shopping with traditional and online banks and make sure the credit union you are considering offers the best rates for the service you need.

6 Benefits of Using a Credit Union (2024)

FAQs

What are the benefits of using a credit union? ›

Local and personalized service.

Credit unions are a great choice if you are looking to have a voice in the way your financial institution is run, save money on interest and fee expenses, earn more on your savings, build relationships with those who serve you, and get timely decisions on your financial applications.

What are the benefits of using a credit union bank and Internet bank? ›

Credit unions: Non-profit, member-owned cooperatives focused on serving their local communities. Members have more opportunities for input and often receive better rates and fees. Online banks: For-profit companies operating primarily online, offering lower overhead and potentially higher savings rates.

Which is usually a benefit of being a member at a credit union? ›

Credit unions can offer great interest rates and low fees. Rather than paying profit margins to investors, credit unions put profits back into the business by offering low interest rates on loans and high interest rates on savings accounts, effectively giving any extra money back to credit union members.

What are three pros and three cons for credit unions? ›

The Pros And Cons Of Credit Unions
  • Better interest rates on loans. Credit unions typically offer higher saving rates and lower loan rates compared to traditional banks. ...
  • High-level customer service. ...
  • Lower fees. ...
  • A variety of services. ...
  • Cross-collateralization. ...
  • Fewer branches, ATMs and services. ...
  • The biggest negative.
Oct 4, 2022

What are the benefits of using a credit union instead of a bank? ›

What Are the Major Advantages of Credit Unions? Credit unions typically offer lower closing costs for home mortgage loans, and lower rates for lending, particularly with credit card and auto loan interest rates. They also have generally lower fees and higher savings rates for CDs and money market accounts.

What are the pros and cons of a credit union? ›

The pros of credit unions include better interest rates than banks, while the cons include fewer branches and ATMs.

Is your money safer in a credit union? ›

Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.

What is an advantage of credit union Quizlet? ›

An advantage credit unions may have over other financial institutions is: lower fees & lower loan rates.

What is the best credit union to bank with? ›

Here are some of the country's top credit unions:
  • Alliant Credit Union. Alliant offers an above-average interest rate for savings. ...
  • Consumers Credit Union. ...
  • Navy Federal Credit Union. ...
  • Connexus Credit Union. ...
  • First Tech Federal Credit Union.

Does being in a credit union help your credit? ›

While the individual options may differ from one to the next, most credit unions offer custom loan programs designed to help borrowers establish credit for the first time or rebuild damaged credit. Some credit unions use aptly-named “credit builder loans” that function much like secured credit cards.

Is it better to have money in a credit union? ›

Like we hinted at in the last reason, Credit Unions are known to have better and lower loan rates compared to big banks because our profits go right back to our members in the form of great deals. Expect lower interest rates and bigger returns with a Credit Union.

What are the benefits of using a bank? ›

  • Your money is safe. ...
  • Your money is protected against error and fraud. ...
  • You get your money faster with no check-cashing.
  • You can make online purchases with ease and peace.
  • You have access to other products from the bank. ...
  • You can transfer money to family and friends with.
  • You have proof of payment.

Why are credit unions so safer? ›

Credit unions are backed by the National Credit Union Share Insurance Fund (NCUSIF), which is equivalent to the Federal Deposit Insurance Corporation (FDIC) for banks. This safety net guarantees your funds, typically up to $250,000 per depositor, should any unexpected turbulence occur.

How to tell if a credit union is good? ›

How to Choose a Credit Union: Top Ten Factors to Consider
  1. Rates and Fees. Credit unions (CUs) offer lower rates and fees on most of their products. ...
  2. Outstanding Customer Service. ...
  3. Community Focus of Credit Unions. ...
  4. Apps and Technology. ...
  5. ATMs and Branch Locations. ...
  6. Security and Insurance. ...
  7. Assess Your Needs. ...
  8. Check Eligibility.
Sep 12, 2019

Which loan is illegal in Georgia? ›

Payday loans are generally illegal in Georgia, unless made by a lender licensed by Georgia's Department of Banking and Finance, though some lenders may qualify for exemption from licensure.

What is one of the drawbacks of a credit union? ›

Membership required. Credit unions require their customers to be members. Account holders must meet eligibility requirements to use the products and services.

What is the downside of banking with a credit union? ›

With a credit union, you might have to do some extensive research to compare accounts and find out what services they offer. Credit unions only serve certain groups of people and if the ones you can join don't have mobile banking or their apps aren't up to par, that could potentially be a major disadvantage.

Is it good to have money in a credit union? ›

Expect lower interest rates and bigger returns with a Credit Union. Don't believe us? Take a look at our interest rates and see for yourself! Your money is safer in a Credit Unions hands because all accounts are federally insured up to $250,000 and backed by the U.S. government.

Is it safer to have your money in a credit union? ›

However, because credit unions serve mostly individuals and small businesses (rather than large investors) and are known to take fewer risks, credit unions are generally viewed as safer than banks in the event of a collapse. Regardless, both types of financial institutions are equally protected.

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